Exhibit 99.1
For Release Immediate
Contacts (News Media) Jim Rosensteele, SVP, Marketing
Communications 317.817.4418
(Investors) Tammy Hill, SVP, Investor Relations 317.817.2893
Conseco Reports First Quarter Results
Carmel, Ind., May 6, 2004 -- Conseco, Inc. (NYSE: CNO) today reported financial
results for the quarter ended March 31, 2004. The company emerged from Chapter
11 bankruptcy on September 10, 2003. Results for periods following our emergence
from Chapter 11 reflect fresh-start accounting adjustments as required by
generally accepted accounting principles ("GAAP"). Accordingly, our financial
results for periods following our emergence from bankruptcy are not comparable
to our results prior to emergence. Activity of the company for periods after
September 1, 2003 is included in the post-bankruptcy or "successor company"
financial statements. Activity of the company for periods prior to September 1,
2003 is included in the pre-bankruptcy or "predecessor company" financial
statements.
Operating results
For the quarter ended March 31, 2004 Conseco reported net income (after
dividends on convertible exchangeable preferred stock) of $49.9 million, or 50
cents per diluted common share. Results for the quarter included net after-tax
gains of $12.9 million from realized investment gains.
As previously reported, the predecessor company reported a net loss for the
quarter ended March 31, 2003 of $19.0 million.
Results by segment were as follows ($ in millions):
Successor Predecessor
-------------------------------------- ----------------
Three Months Three Months Three Months
Ended Ended Ended
March 31, 2004 December 31, 2003 March 31, 2003
-------------- ----------------- --------------
Earnings (loss) before taxes:
Bankers Life $56.4 $60.0 $55.9
Conseco Insurance Group 60.5 68.8 16.3
Other Business in Run-off 14.9 10.7 (32.4)
Corporate Operations (39.1) (29.0) (112.4)
Realized gains, net of related amortization, and
venture capital income (losses) 19.7 1.2 25.1
---- ---- -----
Earnings (loss) before taxes and
discontinued operations 112.4 111.7 (47.5)
Tax expense (benefit) 39.6 39.6 (14.6)
---- ---- -----
Income (loss) before discontinued operations 72.8 72.1 (32.9)
Discontinued operations, net of income taxes - - 13.9
---- ---- -----
Net income (loss) 72.8 72.1 (19.0)
Preferred stock dividends 22.9 22.5 -
---- ---- -----
Net income (loss) applicable to common stock $49.9 $49.6 $(19.0)
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Conseco (2)
May 6, 2004
Earnings in our Bankers Life and Conseco Insurance Group segments were below our
original expectations due, in part, to decreases in net investment income.
Although the book value of our total investments increased, net investment
income decreased by approximately $9.0 million between the fourth quarter of
2003 and the first quarter of 2004 primarily due to prevailing market rates of
interest and prepayments in our mortgage-backed securities portfolio. First
quarter net investment income was reduced by approximately $6.2 million of
premium amortization associated with prepayments on fixed maturity investments
(primarily mortgage-backed securities), which had been marked to market, as
required by "fresh start" accounting, at prices above par. Investment purchases
during the first quarter were at average yields of 5.05%. The average portfolio
yield on our fixed maturity portfolio was 5.55% at December 31, 2003 and 5.53%
at March 31, 2004.
Pre-tax results in our Conseco Insurance Group segment included adverse life
mortality experience of approximately $4.4 million from higher than expected
death claims.
Pre-tax results in our Corporate Operations segment included severance expense
of $4.4 million and a credit agreement charge of $2.0 million.
Collected premiums
Collected premiums in each of our operating segments by product line were as
follows ($ in millions):
Successor Predecessor
------------------------------------------ --------------
Three Months Three Months Three Months
Ended Ended Ended
March 31, 2004 December 31, 2003 March 31, 2003
-------------- ----------------- --------------
Bankers Life segment:
Annuity products $177.3 $190.2 $260.0
Supplemental health products 303.2 311.3 278.5
Life products 37.8 46.7 34.1
----- ----- -----
Total collected premiums $518.3 $548.2 $572.6
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Conseco Insurance Group segment:
Annuity products $13.4 $12.8 $37.8
Supplemental health products 190.9 204.6 196.5
Life products 101.8 97.3 105.9
----- ----- -----
Total collected premiums $306.1 $314.7 $340.2
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Other Business in Run-off segment:
Long-term care products $98.6 $102.8 $96.9
Major medical products 6.0 22.6 61.6
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Conseco (3)
May 6, 2004
Supplemental Health Product Loss Ratios
Loss ratios on major supplemental health lines of business in each of our
segments were as follows:
Successor Predecessor
------------------------------------------ ---------------
Three Months Three Months Three Months
Ended Ended Ended
March 31, 2004 December 31, 2003 March 31, 2003
-------------- ----------------- --------------
Bankers Life segment:
Medicare Supplement:
Earned premium $162 million $159 million $162 million
Loss ratio 65.56% 61.56% 71.08%
Long-Term Care:
Earned premium $131 million $130 million $123 million
Loss ratio 89.26% 85.48% 83.31%
Interest-adjusted loss ratio(a) 62.86% 59.27% 66.90%
Conseco Insurance Group segment:
Medicare Supplement:
Earned premium $96 million $98 million $96 million
Loss ratio 61.10% 66.02% 67.73%
Specified Disease:
Earned premium $90 million $91 million $92 million
Loss ratio 70.15% 61.92% 69.37%
Other Business in Run-off segment:
Earned premium $103 million $109 million $188 million
Loss ratio 98.06% 99.07% 113.57%
Interest-adjusted loss ratio(a) 59.99% 64.45% 95.02%
<FN>
(a) Calculated as the product's: (i) insurance policy benefits less interest
income on the accumulated assets which back the insurance liabilities; divided
by (ii) earned premium.
</FN>
Earnings Guidance and Outlook
Conseco reaffirmed guidance at the low end of its previously reported range of
$175 million to $200 million of expected net income applicable to common stock
for the 12 months beginning October 1, 2003. Our earnings guidance is based on
numerous assumptions and factors. If they prove incorrect, our actual earnings
could differ materially from our estimates (see note on forward-looking
statements below). Our guidance excludes any impact from realized investment
gains (losses) and the proposed refinancing of our current capital structure
described in our Form S-1 Registration Statement initially filed on January 29,
2004.
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Conseco (4)
May 6, 2004
Comments from CEO Bill Shea
"In spite of the pressure on our first quarter operating results from the lower
interest rate environment and unfavorable mortality, we were generally pleased
with our other key operating metrics. We are continuing to focus on the business
fundamentals that will drive our long-term value as an enterprise - cash flow,
statutory capital, asset quality and operational excellence. It is no
coincidence that these fundamentals are also the key to our primary short-term
goal, which is to achieve higher ratings for our insurance companies. Once again
this quarter, we made more progress on the following statutory-basis measures:
o Combined statutory earnings (before realized investment gains and before
interest expense paid to the parent company on surplus notes) (a
non-GAAP measure) were an estimated $54.8 million in 1Q04, up 12 percent
over 1Q03.
o Combined Company Action Level risk-based capital (RBC) ratio (a non-GAAP
measure) was an estimated 297% at March 31, 2004, up from 287% at
year-end 2003, and 166% at March 31, 2003.
"Our new annualized premium sales of supplemental health and life products for
the first quarter were generally in line with our operating plan and totaled
approximately $52 million at Bankers Life and $20 million at Conseco Insurance
Group. First-year annuity deposits for the quarter were $176 million and $6
million at Bankers Life and Conseco Insurance Group, respectively.
"Our other major goals for 2004 continue to be:
o Expanding our career agent segment (Bankers Life) into new geographic
markets. During the first quarter 2004, Bankers added six branches to
its network and is on track to meet its goal of approximately 170
branches nationwide by year-end 2004.
o Further reducing operating expenses and improving the efficiency of our
operations across all business functions. Operating expenses for the
quarter were in line with our plan and we believe we are still on track
to meet our 2004 goal of at least a $20 million reduction in our core
operating expense levels.
o Continuing our focus on the acquired blocks of long-term care business
in the Other Business in Run-off segment. This business performed within
our expectations for the quarter, thanks to the work of the team we have
dedicated to managing its runoff. Also, we believe that the recently
announced order from the Florida Insurance Department protects the
policyholders of our Conseco Senior Health subsidiary while providing
the subsidiary with the ability to mitigate its losses and enhance its
ability to pay future claims.
o Consolidating and streamlining our back-office systems to reduce
complexity and improve customer service. We've begun to eliminate niche
processing systems, moving toward a simpler, more customer-responsive
organization.
"We are also announcing today that the expected grant described in our
prospectus of approximately 3 million options to our officers will have an
exercise price equal to the higher of $21.00 per share or the fair market value
on the date of the grant.
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Conseco (5)
May 6, 2004
"We've come a long way since our emergence from Chapter 11 less than eight
months ago. Our roadmap is clear. Our goal is to become a premier insurance
company serving middle-income Americans throughout their working careers and
retirement. We believe we can achieve that goal by capitalizing on what we
believe to be our key advantages:
o A valuable franchise uniquely focused on the growing senior and
middle-income markets
o A diverse and relevant product portfolio
o A diverse distribution network
o A strong balance sheet
"As managers and associates, we recognize that we have an opportunity to
recreate a viable and valuable company with which all of us can be proud to be
associated. Execution is the key, and we plan on getting it done."
About Conseco
Conseco, Inc.'s insurance companies help protect working American families and
seniors from financial adversity: Medicare supplement, long-term care, cancer,
heart/stroke and accident policies protect people against major unplanned
expenses; annuities and life insurance products help people plan for their
financial future. For more information, visit Conseco's web site at
www.conseco.com.
Cautionary Statement Regarding Forward-Looking Statements. Our statements, trend
analyses and other information contained in this press release relative to
markets for Conseco's products and trends in Conseco's operations or financial
results, as well as other statements contain forward-looking statements, within
the meaning of the federal securities laws and the Private Securities Litigation
Reform Act of 1995. Forward-looking statements typically are identified by the
use of terms such as "anticipate," "believe," "plan," "estimate," "expect,"
"project," "intend," "may," "will," "would," "contemplate," "possible,"
"attempt," "seek," "should," "could," "goal," "target," "on track," "comfortable
with," "optimistic" and similar words, although some forward-looking statements
are expressed differently. You should consider statements that contain these
words carefully because they describe our expectations, plans, strategies and
goals and our beliefs concerning future business conditions, our results of
operations, financial position, and our business outlook or they state other
"forward-looking" information based on currently available information.
Assumptions and other important factors that could cause our actual results to
differ materially from those anticipated in our forward-looking statements
include, among other things: (i) the potential adverse impact of our
predecessor's Chapter 11 petition on our business operations, and relationships
with our customers, employees, regulators, distributors and agents; (ii) our
ability to operate our business under the restrictions imposed by our senior
bank credit facility or future credit facilities; (iii) our ability to improve
the financial strength ratings of our insurance company subsidiaries and the
impact of rating downgrades on our business; (iv) our ability to obtain adequate
and timely rate increases on our supplemental health products including our
long-term care business; (v) general economic conditions and other factors,
including prevailing interest rate levels, stock and credit market performance
and health care inflation, which may affect (among other things) our ability to
sell products and access capital on acceptable terms, the market value of our
investments, and the lapse rate and profitability of policies; (vi) our ability
to achieve anticipated synergies and levels of operational efficiencies; (vii)
customer response to new products, distribution channels and marketing
initiatives; (viii) mortality, morbidity, usage of health care services,
persistency and other factors which may affect the profitability of our
insurance products; (ix) performance of our investments; (x) changes in the
Federal income tax laws and regulations which may affect or eliminate the
relative tax advantages of some of our products; (xi) increasing competition in
the sale of insurance and annuities; (xii) regulatory changes or actions,
including those relating to regulation of the financial affairs of our insurance
companies, including the payment of dividends to us, regulation of financial
services affecting (among other things) bank sales and underwriting of insurance
products, regulation of the sale, underwriting and pricing of products, and
health care regulation affecting health insurance products; (xiii) the ultimate
outcome of lawsuits filed against us and other legal and regulatory proceedings
to which we are subject; and (xiv) the risk factors or uncertainties listed from
time to time in our filings with the Securities and Exchange Commission.
Other factors and assumptions not identified above are also relevant to the
forward-looking statements, and if they prove incorrect, could also cause actual
results to differ materially from those projected. All written or oral
forward-looking statements attributable to us are expressly qualified in their
entirety by the foregoing cautionary statement. Our forward-looking statements
speak only as of the date made. We assume no obligation to update or to publicly
announce the results of any revisions to any of the forward-looking statements
to reflect actual results, future events or developments, changes in assumptions
or changes in other factors affecting the forward-looking statements.
- Tables Follow -
Conseco (6)
May 6, 2004
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in millions)
Successor
---------------------------------
March 31, December 31,
2004 2003
---- ----
(unaudited)
ASSETS
Investments:
Actively managed fixed maturities at fair value (amortized cost:
March 31, 2004 - $20,145.4; December 31, 2003 - $19,470.7)........................ $20,963.4 $19,840.1
Equity securities at fair value (cost: March 31, 2004 - $72.3;
December 31, 2003 - $71.8)....................................................... 77.2 74.5
Mortgage loans...................................................................... 1,116.0 1,139.5
Policy loans........................................................................ 492.9 503.4
Trading securities.................................................................. 935.4 915.1
Other invested assets .............................................................. 195.8 324.1
--------- ---------
Total investments................................................................. 23,780.7 22,796.7
Cash and cash equivalents:
Unrestricted........................................................................ 999.0 1,228.7
Restricted.......................................................................... 15.5 31.9
Accrued investment income............................................................. 309.0 315.5
Value of policies in force at the Effective Date......................................... 2,807.2 2,949.5
Cost of policies produced................................................................ 181.4 101.8
Reinsurance receivables.................................................................. 924.4 930.5
Income tax assets........................................................................ 9.8 24.6
Goodwill................................................................................. 773.9 952.2
Other intangible assets.................................................................. 153.3 155.2
Assets held in separate accounts......................................................... 34.8 37.7
Other assets............................................................................. 475.3 395.8
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Total assets...................................................................... $30,464.3 $29,920.1
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LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liabilities for insurance and asset accumulation products:
Interest-sensitive products........................................................ $12,443.7 $12,480.4
Traditional products............................................................... 11,435.7 11,431.8
Claims payable and other policyholder funds........................................ 903.4 892.3
Liabilities related to separate accounts........................................... 34.8 37.7
Other liabilities.................................................................... 742.1 573.0
Investment borrowings................................................................ 461.2 387.3
Notes payable - direct corporate obligations......................................... 1,296.5 1,300.0
--------- ---------
Total liabilities.............................................................. 27,317.4 27,102.5
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Commitments and Contingencies
Shareholders' equity:
Preferred stock...................................................................... 910.4 887.5
Common stock ($0.01 par value, 8,000,000,000 shares authorized, shares issued and
outstanding: March 31, 2004 - 100,115,772; December 31, 2003 - 100,115,772)........ 1.0 1.0
Additional paid-in-capital........................................................... 1,646.4 1,641.9
Accumulated other comprehensive income............................................... 470.7 218.7
Retained earnings.................................................................... 118.4 68.5
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Total shareholders' equity....................................................... 3,146.9 2,817.6
--------- ---------
Total liabilities and shareholders' equity ...................................... $30,464.3 $29,920.1
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Conseco (7)
May 6, 2004
CONSECO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in millions, except per share data)
(unaudited)
Successor Predecessor
------------ ------------
Three months Three months
ended ended
March 31, March 31,
2004 2003
---- ----
Revenues:
Insurance policy income..................................................... $748.4 $ 873.6
Net investment income:
General account assets................................................... 312.0 347.3
Policyholder and reinsurer accounts...................................... 15.7 (23.1)
Venture capital income related to investment in AT&T Wireless
Services, Inc.......................................................... - 2.5
Net realized investment gains.............................................. 27.1 23.3
Fee revenue and other income................................................ 7.4 13.6
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Total revenues........................................................... 1,110.6 1,237.2
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Benefits and expenses:
Insurance policy benefits................................................... 719.7 858.7
Provision for losses........................................................ - 15.3
Interest expense (contractual interest of $97.6 for the three
months ended March 31, 2003)............................................. 29.1 73.6
Amortization................................................................ 98.2 158.0
Other operating costs and expenses.......................................... 151.2 161.0
Reorganization items........................................................ - 18.1
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Total benefits and expenses.............................................. 998.2 1,284.7
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Income (loss) before income taxes and discontinued operations............ 112.4 (47.5)
Income tax expense (benefit) on period income (loss)............................ 39.6 (14.6)
------- -------
Income (loss) before discontinued operations............................. 72.8 (32.9)
Discontinued operations, net of income taxes.................................... - 13.9
------- -------
Net income (loss)........................................................ 72.8 (19.0)
Preferred stock dividends....................................................... 22.9 -
------- -------
Net income (loss) applicable to common stock............................. $ 49.9 $ (19.0)
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Earnings per common share:
Basic:
Weighted average shares outstanding...................................... 100,116,000
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Net income............................................................... $.50
====
Diluted:
Weighted average shares outstanding...................................... 100,588,000
===========
Net income............................................................... $.50
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